What is Customer Segmentation?

What Is Customer Segmentation? It’s what will help you survive in a consumer’s world. With the effects of globalization and the advent of online shopping, consumers now have more choice than they ever have. As such, businesses must stay highly attuned to the changing needs and desires of consumers, responding to and even anticipating consumer needs and trends in order to market their products effectively.

Customer segregation, also known as market segmentation, allows companies to stay ahead of their competitors by allowing them to target smaller, specific consumer bases in their marketing strategies. But how does it work? Put simply, customer segmentation is a process that allows company researchers to identify various key aspects that differentiate and segment larger consumer bases into smaller groups. Researchers collect information on customer demographics, identifying them according to age, race, family size, gender, income and education levels, and ethnicity). Customers are also segregated according to geography and employment (where they live and work), psychographic (social class, personality types, lifestyle habits), and behavioral aspects (spending trends, purchasing history). All of these aspects are taken into account during the process of customer segmentation.

What are the Benefits of Customer Segmentation?

Customer segmentation operates on the assumption that every customer is unique and should be marketed to accordingly. Once researchers collect the required data, companies can then target their marketing campaigns to smaller groups of people, incorporating what they’ve learned about that customer base’s demographics and consumer history. As such, companies are able to tailor their advertising efforts to meet the needs and desires of that smaller customer segment.

Customer segmentation also helps companies gain a better understanding of their customers’ preferences and needs, and thus can better their own services, products, and marketing campaigns to match those preferences and needs. Not all customers will respond the same way to certain products of advertising campaigns. For example, customers who live in predominantly hot and dry geographic regions will most likely not be running out to buy umbrellas in bulk. Similarly, customer bases that are primarily over the age of 65 may respond more favorably to print advertisements rather than online or social media marketing campaigns. Customer segmentation allows companies to market the right products in the right mediums to the right people, thus cutting down substantially on labor and marketing costs, and attaining a higher degree of success.

Know Your Audience

Indeed, customer segmentation relies on that old adage: “Know Your Audience.” Companies that are more attuned to the needs and preferences of their customer bases have a much better chance of securing new customers, as well as building loyal customer bases, as they can both anticipate and fulfill their customers’ particular needs. Small and large-scale companies use customer segmentation, but the depth to which companies will research certain segments of customer bases varies considerably and depends on how many markets a company wants to market to simultaneously.

Advertising is a highly costly and labor-intensive effort. Therefore, customer segmentation allows companies to advertise strategically, rather than waste valuable time and labor marketing to certain segments of the population who are most likely uninterested in their policies and services for whatever reasons.

Kelton, a market research firm in Los Angeles, New York, Chicago, and London provides actionable strategic plans with a range of qualitative and quantitative research methodologies like brand tracking, customer journey mapping, market segmentation, copy testing, omnibus surveys and many more. Visit KeltonGlobal for more info.